Moody’s said these “have increased the probability of deterioration in the banks’ credit profiles under potential adverse conditions in the future.”

Menon said an estimated 5 percent to 10 percent of borrowers in Singapore “have probably overleveraged on their property purchases — that is, they have total debt service payments at more than 60 percent of their income.”

Lower-income households and those with lesser savings could be strained if mortgage rates rise.

“When interest rates rise, long before any bank gets into trouble, some households will,” he said. “Banks must therefore practice responsible lending and consider the ability of borrowers to service their debt in a sustainable manner.”

Housing loans by banks have risen 18 percent each year over the past three years, he said.

Home loans as a percentage of GDP currently stand at 46 percent, up from 35 percent three years ago, he added.